FCC Roundup - 2009 Budget and Auction Update

The Federal Communications Commission today proposed a fiscal year budget for 2009 of $338.9 million, up from $313 million in 2008. Large chunks of spending would go to educating consumers on the conversion of analog television to digital television and better oversight of its Universal Service Fund.

The budget includes $20 million for mailers, public service announcements and mailers for the estimated 70 million viewers of analog television ("rabbit ear antennas") who will see their sets go dark after Feb. 17, 2009. The Commission also called for $25.5 million to "combat waste fraud and abuse" of its Universal Service Fund, essentially a government-subsidized program aimed to deploy telecommunications services to rural and other underserved areas in the nation.

Separately, today marks day eight of its auction of 700-megahertz wireless spectrum that will be freed up with the transfer of analog television to digital TV. So far, total provisional bids reached $18.8 billion, well above the commission's goal of $10 billion.

Activity on the coveted nationwide C Block, the largest chunk of spectrum up for sale, has been quiet since its minimum price reserve was met last Thursday - an important move that triggered the Commission's open network rule for those airwaves. The open network rules call for the network to be open to any wireless device and software application.

Much of the bidding activity is happening in the separate regional C Blocks, which as an aggregate surpassed the bid price of $4.72 billion for the packaged nationwide block.

What does that mean? Several possibilities, according to Rebecca Arbogast at Stifel Nicolaus. The bidding on regional licenses could mean a continued battle for the coveted spectrum by possible two bidders, which she believes is Verizon and Google. Or it could mean a third party has come from the now costly B Block of lower band spectrum and switched to the C Block auction.

Tomorrow will be an interesting day, she said, as activity on the regional C Block licenses could prompt another bid on the nationwide packaged C Block.